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Bernanke’s Bubble Continues! Until it Ends!

March 6, 2013

A trend in motion will continue until it ends. Central Planner, Ben Shalom Bernanke, has pumped into our economy trillions of digits to inflate asset values these past 5 years. This ‘wealth effect’ is imaginary, yet it creates a positive psychology for the wealthy few. The vast majority of Americans, however, have no stocks, bonds, or financial derivatives; and most now have less affordability for housing with the recent tax increases. So, when will Bernanke’s ‘put’ end? Can he create a ‘wealth effect’ indefinitely…by pumping up liquidity via his QE policies? Is there an END GAME?

Our prior Fed Chairman, Alan Greenspan, was able to create a real estate bubble from 2001 – 2007. Greenspan continued to lower interest rates and the media promoted lower mortgage payments as a boon for home buyers. Our politicians then continued to promote the idea that ‘house values’ do not decrease…so buy now even if you have no credit, job, or income. All this hype and delusion works for a short time period. Eventually, however, reality emerges and puts a stop to false illusionary psychology.

The DOW index has now increased some 7,600 points since the low in 2009. The media are now promoting the concepts of a strong growing economy with housing, technology, manufacturing, and consumer stables as sectors which will continue our prosperity for years to come. Basically, many within the media and their pundits, now think that Bernanke’s bubble economy can continue for 2013 and beyond. But, have any of the fundamental issues which created the last crash (2008) been resolved? Is our economy SOUND?

I would suggest that none of the core issues have been resolved or even dealt with to date. Unemployment is near 14% (22 million Americans out of work or looking for work); Food stamp assistance has increased every year and is now at 48 million Americans; our Balance of Trade is seriously negative; Student loans are defaulting at a record level; Consumer affordability for new housing is worse (take home pay is not increasing); Government deficits continue at the $1 trillion level; Government Debt is still increasing (as our Treasury is borrowing some 42 cents of every dollar spent); Total Debt and Unfunded Liabilities continues to increase; and our World Economic System is held together with bandages (mostly accounting gimmicks).

Our new technologies (high-speed computers and speed of light communication) has allowed the markets to be manipulated and massaged by our Central Planners (now just a few key policymakers) on our Planet. Money units are created ‘out of consciousness’ (by our Central Planners) to give people the illusion that all is well and sound. This money illusion continues to work as long as the psychology is positive and the trends continue to create a ‘wealth effect’ that people accept and assume will continue. The interesting part of all this is that all this illusion works (to a degree) as long as the vast majority of people are unaware of the emerging underlying problems. Illusion works for a Season!

The problems underlying all this illusion, however, continue to manifest themselves over time. Our Debt is not being eliminated! Our Deficits are not disappearing! Growth of real wealth is not increasing sufficiently to off-set our continuing Trade Deficits! Lay-offs and unemployment are not being reduced! In other words, the underlying problems which caused the Crash of 2008 are actually getting much worse over time. What does this mean for the coming months and years? Will the END GAME for the Bernanke ‘put’ emerge?

At some point going forward, the realities of the market place will surface and change the current illusions. Ben Bernanke and his QE policies have given the market a type of ‘wealth effect’ for the moment. This illusionary effect, however, will vanish at some point going forward. My sense is that the core realities (of the market place) will emerge some time in 2013. We could witness a major Stock Market Crash at any time. The Bond markets are also in a serious Bubble. A Bond Market Crash is on the horizon and could also develop in 2013. The biggest Crash of all could be our Derivative Bubble (now near 700 trillion globally). This entire Bubble is likely to Crash at some point within the next year to three years. So what has Bernanke and his Cartel of Global Bankers really accomplished with all their ‘pump priming’ and financial Gimmickry?

Most people do not live in a NOW reality. Most people seem to live within a paradigm of past/future reality. This mindset ignores the NOW realities. The past, in the mind’s of most, is ignored as a teacher; and the future (one’s imagination) is viewed as real and present as long as most people (the unaware public) ignores the Now Problems. Few people seem to live in the NOW moment which (to me) is the reality that actually creates our destiny. There is no ‘past’ or ‘future’ (in reality). Past and Future are merely NOW memories. The NOW moment is how we all consciously live and act. Our real problems will not disappear by merely thinking about some idyllic future (mentally). Problems must eventually be dealt with and problems can not be dismissed forever.

In conclusion, PROBLEMS are the real ‘stuff’ of life. Problems do not disappear when we ignore them. An alcoholic can live the illusion of ‘well being’ for a time. Eventually, however, all alcoholics must deal with their problem and suffer the consequences of their excessive alcoholic behavior. The PROBLEM does not disappear via mere positive thinking (thinking that the NOW problems can be avoided forever)! Bernanke’s ‘put’ has worked for a time (nearly 5 years). The Day of reckoning, however, is likely ‘sooner’ rather then ‘later’! Watch for some reality emerging in 2013! Bernanke’s ‘put’ may soon be OVER! That is my message for today! I am:

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